Uncertainty Attitudes, Subjective Beliefs, and Decisions Under Uncertainty

We conducted survey experiments to gather new data on uncertainty attitudes and subjective beliefs. Our survey targets a general population, focusing on health and financial decisions. We collect data on (i) individual attitudes toward risk and ambiguity, including individual-specific probability weighting and loss aversion, and (ii) individual probabilistic beliefs about events related to the decisions we consider. The joint availability of individual preference parameters and subjective beliefs allows us to study heterogeneity and cross-correlations across these parameters in depth and to estimate structural models of decision making under uncertainty that go beyond subjective expected utility. We find that both preferences and beliefs are highly heterogeneous. Compared with subjective expected utility, prospect theory combined with source-dependent probability weighting fits the data strictly better in some contexts and equally well in others. Prospect theory performs particularly well when the belief distribution is concentrated toward extreme values.

This paper was accepted by Marie Claire Villeval, behavioral economics and decision analysis.

Funding: A. Delavande acknowledges funding from the Economic and Social Research Council Research Centre on Micro-Social Change [Grants ES/L009153/1 and ES/S012486/1] and the National Institute on Aging [Grant P01AG008291]. J. Ganguli acknowledges research support from the Economic and Social Research Council [Grant ES/K00168X/1]. F. Mengel acknowledges support from the European Research Council [Grant DYNNET-805017]. Ethical approval was obtained by the Ethics Social Sciences subcommittee at the University of Essex in August 2015.

Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2024.06232.